Postwar Business Cycles: What Are the Prime Drivers?

37 Pages Posted: 27 Mar 2020

See all articles by David Meenagh

David Meenagh

Cardiff University Business School

Patrick Minford

Cardiff University Business School; Centre for Economic Policy Research (CEPR)

Olayinka Oyekola

University of Exeter INTO

Date Written: March 3, 2020

Abstract

This paper presents a structural model to account for a country's business cycle fluctuations. Our model is a two-sector open economy dynamic stochastic general equilibrium model in which production structure is classified by the intensity levels of primary energy (oil) use by firms in each sector. We estimate this model on unfiltered data by Indirect Inference, which is a simulation-based econometric approach. The results establish the fit of our model to the observed data. The estimated model is then scrutinized concerning the three epochs in US postwar economic activity, as we ask: Of the twenty-two structural shocks admitted into the model, which were the prime drivers of the Great Inflation, the Great Moderation, and the Great Recession?

Keywords: Business Cycles, DSGE, Shocks, Indirect Inference, Unfiltered Data

JEL Classification: E32, D58, F41, C52, Q43

Suggested Citation

Meenagh, David and Minford, Patrick and Oyekola, Olayinka, Postwar Business Cycles: What Are the Prime Drivers? (March 3, 2020). Available at SSRN: https://ssrn.com/abstract=3547761 or http://dx.doi.org/10.2139/ssrn.3547761

David Meenagh

Cardiff University Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 29 2087 5198 (Phone)
+44 29 2087 4419 (Fax)

Patrick Minford

Cardiff University Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 29 2087 5728 (Phone)
+44 29 2087 4419 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Olayinka Oyekola (Contact Author)

University of Exeter INTO ( email )

Stocker Rd
Exeter, EX4 4PY
United Kingdom

HOME PAGE: http://www.olayinkaoyekola.com

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